Associated Press ~ Russian shares plunge amid market closures By NATALIYA VASILYEVA - 4 hours ago

MOSCOW (AP) - Russia’s battered stock markets suffered another chaotic day of trading Thursday, as regulators shut the exchanges in response to falling share prices, then reopened them - a practice that is wearing thin with investors.

The MICEX closed 7.6 percent down, at 598.4 points. The other main exchange, RTS, dropped 2.4 percent to 620 points.

On Thursday regulators shut down the MICEX exchange, where most trading in Russian stocks takes place, soon after the market opened when the composite index slumped 10 percent. Regulators reopened MICEX just a half-hour later.

Analysts have warned that constant stoppages undermine foreign investors’ trust in the Russian market, encouraging them to sell stocks even in healthy companies and take their business elsewhere.

Russia’s resource-dependent economy has been battered by weaker oil prices, and its equity markets have declined in lockstep with crude, with Urals blend oil - the primary kind produced by Russia - falling below $50 a barrel on Thursday. It was the lowest price for Urals blend since January 2007.

Regulators from the Federal Financial Markets Service have repeatedly suspended trading on the MICEX and the RTS, the two major exchanges, in recent weeks as price of shares has swung widely - mostly downward.

Russia is spending government reserves to prop up its banking system and currency exchange rate amid the world financial crisis, and stock plunges don’t help either battle. There are also bad memories of the country’s 1998 financial collapse, which was preceded by steep stock-market declines.

"It looks like chaos," says Ovanes Oganisian, equity analyst with Renaissance Capital investment bank. "All the liquidity goes to Western trading floors."

Russia’s stock market has been declining feor weeks as fears over the financial crisis and sliding oil prices grow, and regulators have repeatedly closed markets. But their actions appear to have done little to preserve equity value. The RTS has lost 73 percent since January, while the MICEX is down 69 percent.

Traders say the suspensions make it impossible for risk managers at foreign investment firms to do any planning.

"It’s easier for them to say: ’Just get rid of the Russian stocks out of our portfolio because we can’t reliably price them in the middle of the trading day’," said Ronald Smith, chief strategist at Alfa Bank.

Roman Goryunov, CEO of the RTS, a dollar-denominated exchange, told a corporate governance seminar on Thursday that trading suspension "cannot avert a decline, a trend."

But he added that "closing the market in a panicked situation can have a sobering effect".

MICEX executives were unavailable for comment on Thursday.

Under the rules, Russian regulators are supposed to step in and halt trading after stock indexes moves up or down more than a given number of percentage points. But regulators have changed the limits on stock price movement several times in recent weeks, which has only added to the confusion on the market.

"They need to be consistent," said Smith from Alfa Bank. "They need to set a set of rules and stick to it."

Shortly before the financial crisis paralyzed the stock markets, the government announced ambitious plans for Russia’s trading floors.

President Dmitry Medvedev on Thursday said he was still seeking legislation by the end of the year that would "create an international financial center in Russia," Russian news agencies reported.

Some experts say, though, that Russia can only achieve that status by winning the trust of international investors.

The goal of creating a financial center has been "put back by some amount of time" by the turmoil, Smith said. "A year, six months, two years - who knows."

Associated Press Writer Catrina Stewart contributed to this report.